Defense lobbying is different because of 'the amount of money on the table'

When Steve McBee started working for Rep. Norm Dicks (D-Wash.) in 1994, he had no particular interest in defense issues. He fell into that work because a position on the policy staff was open and he had been waiting several years for a chance to work with the veteran lawmaker.

But it’s no coincidence that today McBee’s lobbying firm, McBee Strategic Consulting LLC, is at the epicenter of several legislative battles over big-ticket defense programs, representing such U.S. defense giants as Boeing, SAIC, Northrop Grumman and General Dynamics.

“Everything I learned about the industry policywise and [about] the politics of the industry, I learned at Norm’s knee,” said McBee, who, as a senior policy aide focusing on defense and national security issues, helped Dicks with his work on the House Appropriations Committee and the House Permanent Select Committee on Intelligence.

As the Senate prepares to consider the defense appropriations bill this week, McBee’s firm has been spending a lot of time making sure lawmakers understand the nation’s military and defense priorities.

“It is going to be a very hard bill,” he added.

Representing both Boeing and SAIC, the prime contractors of the Army’s major modernization effort, known as Future Combat Systems (FCS), McBee said he is trying to make sure people understand “the serious damage that would be done” by a significant reduction to the program and to the bill.

House lawmakers — concerned about the Army’s poor definition of and unrealistic goals for FCS — already slashed more than $400 million from the program, one of the biggest overhauls under way in any military service. The program could surpass the $100 billion mark over the next two decades.

In the Senate, the program has much stronger support, but lawmakers in that chamber have said they want to provide more oversight.

Boeing has found itself in Congress’s crosshairs for the past few years after an Air Force deal to lease a new fleet of Boeing midair refueling tankers was thwarted, landing two Boeing officials in prison and forcing the resignation of Air Force Secretary James Roche. McBee’s firm provided strategic advice on dealing with the tanker issue on an “ongoing basis,” McBee said.

Now the Air Force is expecting a number of defense companies to vie for contracts to renew its tanker fleet and is waiting on a Pentagon analysis of alternatives before it starts the competition for the program.

“My view is that the ball is in the Pentagon’s court now and it is a waiting game to see in what direction they are moving,” McBee said.

Once that is decided, “I think we are going to be vigorously involved,” he added.

Meanwhile, McBee Strategic is also playing a pivotal role in a trade dispute over government subsidies between Boeing and European giant Airbus.

“The work that we have done on the trade case has been very demanding,” McBee said.

“Our focus is on what we do to get subsidies eliminated so that Airbus and Boeing can compete head on” and on equal footing, he explained.

McBee Strategic also represents Nor-throp Grumman’s interests in major defense programs such as its Global Hawk unmanned aerial vehicle, B-2 bombers and the EA-6B electronic warfare aircraft — all of which have faced their fair share of financial ups and downs over the years.

“What makes lobbying in the defense base different than other areas is the amount of money that is on the table,” he said. According to some estimates, defense spending accounts for upwards of 22 cents out of every tax dollar. “It is hard to get your arms around it as opposed to other areas where the playing field is smaller,” he said.

Although the firm boasts several defense clients, McBee insists it is far more than a defense lobbying shop. Defense work now accounts for just one-third of the 3-year-old company’s business, he said.

“When we started the firm, we were primarily focused on defense, transportation and issues affecting the Pacific Northwest,” he said. “Those continue to be important markets for us, but we have diversified to include aviation, homeland security, banking, healthcare.”

Having grown up in the Pacific Northwest, McBee has maintained strong ties to the region by representing a number of Washington-state companies and public interests, such as the city of Everett, Wash., the Port of Seattle, Seattle’s King County and the city of Auburn, Wash.

Some of the newer clients on the list are American Airlines, Goldman Sachs, Washington Group International and the Baltimore-Washington International, Fort Lauderdale, San Diego and Phoenix airports. With all of the new clients, in 2005 McBee Strategic will record its largest growth and revenue so far, he said.

But McBee is still focused on continuing to diversify his business base, an element he regards as critical to long-term success.

“We have been very deliberate about how we got into those markets, and we tried to be very rugged in our analysis,” he said.

“The bets need to be spread evenly across a wide range of areas,” McBee said while sitting in a large armchair in his spacious office that offers travel-brochure views of downtown D.C.

“He is very business-savvy, and he is very entrepreneurial,” said Connie Correll Partoyan, chief of staff for Rep. Cathy McMorris (R-Wash.) who met McBee when they were both working for members of the Washington-state delegation.

“He is able to identify opportunities and take advantage of them, and turn them into solutions for his clients,” she said. “He understands the process … and at the end of the day he is very effective at what he does.”

As part of his diverse practice, McBee is focused on emerging defense issues. Homeland security, and port and supply-chain security in particular, get him fired up.

“If you are interested in working on things that make a difference, then you want to work in the security market,” he said.

McBee is critical about what the government is doing to protect the country from another terrorist attack.

He said he does not believe the U.S. government “has a clear sense of direction about what the best way to protect our country is.”

That leaves businesses trying to operate in a murky and somewhat undefined market.

“I think there is a lot of miscommunication and disconnect between industry and government on this issue,” he said. “I think the government will eventually figure it out and the market will follow.”

This is not the first time McBee has tackled a market facing these problems. When he left Capitol Hill in 1999, he joined lobbyist Denny Miller to form Denny Miller McBee Associates, an attempt to rake in government consulting business from Silicon Valley.

“My observation was that the technology industry in the valley did not have a clear understanding of how what happens in Washington could impact their business,” he said.

Over the years, McBee has had a strong desire to run his own company.

Before coming to Washington, D.C., where he first worked for Rep. Al Swift (D-Wash.) and Sen. Maria Cantwell (D-Wash.), McBee was weighing a decision either to go to law school or try to join a Wall Street firm.

McBee’s company has grown quickly in a short time, said Rick Desimone, chief of staff for Sen. Patty Murray (D-Wash.).

“Knowing his personality and drive, I have no doubt that it will continue to grow,” he said.

For McBee, standing out in the K Street crowd depends on “outhitting and outworking our competition.”

McBee learned the value of hard work at an early age. He said his family, who adopted him, provided a loving, supportive environment but was of modest means. At an early age, he spent some of his childhood in a Utah trailer park.

“Anything you achieve, you have to sweat, bleed and fight for, and take chances,” he said.